The move has surprised the renewables industry, who thought highly of Hendry.
David Smith, chief executive of grids trade association the Energy Networks Association said: "Charles has made an outstanding contribution to UK energy policy not just in government but in opposition before that.
"His vast knowledge and experience has delivered a balanced and incredibly valuable approach. He leaves very big shoes to fill and will be missed."
He is being replaced by John Hayes, MP for South Holland and the Deepings, who moves from the Business Department.
Hayes has campaigned against wind farms in his constituency and was quoted by the BBC in 2009 as saying: "Renewable energy needs to pass the twin tests of environmental and economic sustainability and wind power fails on both counts."
However, Jennifer Webber, RenewableUK's director of external affairs, welcomed his appointment, saying that his experience as minister for skills will be valuable in the green energy sector.
Ed Davey remains the secretary of state for energy.